Chevrolet’s share price is up 3% in after-hours trading on Wednesday after the automaker announced it plans to buy a fleet of more than 200,000 plug-in hybrid vehicles, and analysts are predicting the company’s share market value will be $4.8 billion to $5.4 billion by the end of 2021.
Analysts at Sanford C. Bernstein said the purchase of plug-ins will “give GM a much-needed boost to profitability.”
Analysts also believe the purchase will boost GM’s profit margin, which has shrunk over the past several quarters.
“The company has a big challenge on its hands to find ways to compete with Tesla, Ford and other electric car makers, and the acquisition will help to do that,” said James R. Martin, an analyst at Sanford.
The automaker said in a news release on Wednesday that the transaction is expected to close by the middle of next year.
“We expect the Chevy brand to be a strong driver of growth in the U.S. and globally,” said GM CEO Dan Akerson in a statement.
“We are proud to have the support of our investors and are looking forward to welcoming our new owners,” Akerson added.